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The Dow Chemical Company
2009 Annual Report
The Dow of Tomorrow

Table of contents

  • Page 1
    The Dow of Tomorrow The Dow Chemical Company 2009 Annual Report

  • Page 2
    ... Officers Corporate Governance and Board of Directors The Dow of Tomorrow - Here Today Innovation Sustainability Contributing to Community Success Vision, Mission and Strategy Form 10-K for the Year Ended December 31, 2009 (with selected exhibits) Stockholder Reference Information - Inside Back...

  • Page 3
    ... Products $9,123 Corporate: $1,095 1 The pro forma historical information reï¬,ects the combination of Dow and Rohm and Haas Company, assuming the acquisition had been consummated on January 1, 2008, and the treatment of the sale of Dow's Calcium Chloride business as discontinued operations...

  • Page 4
    ... chemical, advanced material and agroscience businesses, giving us greater exposure to highergrowth, higher-margin segments around the world. We have created an enterprise that uses technology, not just to access existing markets, but to create new ones. With the acquisition of Rohm and Haas...

  • Page 5
    As we look ahead, Dow will complete the integration of Rohm and Haas. We will continue to invest in technology-integrated, market-driven performance businesses that create value for our stockholders and growth for our customers. In 2010, we will invest heavily in research and development - again ...

  • Page 6
    .... We invite you to read why. u THE RIGHT PORTFOLIO The Dow of Today operates three integrated business models with more high-growth, high-margin, technology-rich businesses than ever before. The 2009 acquisition of Rohm and Haas shifted our business portfolio, which is now two-thirds comprised of...

  • Page 7
    ... investments in higher-value, higher-margin products and businesses. At the same time, we have implemented a rigorous, cross-company system of portfolio management to ensure every research dollar is spent on the highest valueadding opportunities. By consistently investing in world-class resources...

  • Page 8
    ... amine technology. Dow and Royal Castor Products sign a commitment to conduct research in sustainable, bio-based products and solutions using castor oil. On April 1, Dow completes its acquisition of Rohm and Haas, marking a significant milestone in Dow's transformation to an earnings-growth company...

  • Page 9
    ... of Energy to develop a new generation of high-power battery technology to supply the automotive industry. Dow and Alstom Power, Inc. announce the successful start-up of the pilot plant to capture carbon dioxide from the flue gas of a coal-fired boiler at the Dow-owned facility in South Charleston...

  • Page 10
    ...Vice President, Hydrocarbons and Energy, Basic Plastics and Joint Ventures, and Executive Oversight, Latin America James D. McIlvenny Senior Vice President, Performance Products Geoffery E. Merszei Executive Vice President of The Dow Chemical Company; President of Dow Europe, Middle East and Africa...

  • Page 11
    ... as exhibits to the Company's Annual Report on Form 10-K for the year ended December 31, 2009. In addition, Mr. Liveris certified to the New York Stock Exchange (NYSE) on June 1, 2009, that he was unaware of any violation by the Company of the NYSE corporate governance listing standards in effect as...

  • Page 12
    ..., product innovation and channels to market •฀฀ Market-centric,฀with฀strong฀sales฀support,฀customer฀service฀ and technical expertise in each geographic area LEADING INDUSTRY POSITIONS (Four businesses: Dow Coating Materials, Dow Building Solutions, Dow Construction Chemicals...

  • Page 13
    ...฀investments,฀energy฀ conservation, automotive safety and light-weighting •฀Building฀value฀through฀bolt-on฀acquisitions฀ LEADING INDUSTRY POSITIONS (Six businesses: Dow Elastomers, Formulated Systems, Dow Wire and Cable, Automotive Systems, Dow Fiber Solutions, Dow Oil and Gas...

  • Page 14
    ... | information technology | oil tanks and road equipment | plastic pipe | textiles | toys, playground equipment and recreational products | wire and cable compounds STRENGTHS AND STRATEGY •฀฀ Vast฀global฀reach฀with฀sales,฀marketing,฀application฀development,฀ technical service...

  • Page 15
    ... STRENGTHS AND STRATEGY •฀฀ Purchases฀and฀converts฀crude฀oil-฀and฀natural฀gas-based฀raw฀ materials into basic chemical building-blocks and intermediate products used by almost all of Dow's downstream businesses •฀฀ Unparalleled฀scale฀and฀global฀reach฀provide...

  • Page 16
    ... Systems Dow AgroSciences Corporate Innovation Fund Basics 1997 1 2007 2008 2009 Pro forma basis. u THE RIGHT PIPELINE By investing in the right resources today, Dow's innovation engine is primed to deliver earnings growth while meeting the challenges of tomorrow. 14 The Dow Chemical Company

  • Page 17
    ... opened Dow's Shanghai Research Center, a fully integrated facility featuring core and business research laboratories and a unique customer innovation center. Dow's high-throughput R&D capabilities help customers get new products and solutions to market faster. q 15 The Dow Chemical Company 2009...

  • Page 18
    ...฀Resource฀Technology,฀which฀uses฀ renewable feedstocks such as soybeans to create natural oil-based polyols. The polyols can be used to develop consumer products that have more natural content, greater performance and a smaller environmental footprint. 16 The Dow Chemical Company

  • Page 19
    ...allow us to share financial and intellectual resources to create breakthrough technologies. For example, in 2009, we signed a multi-year agreement with the California Institute of Technology to work toward next-generation photovoltaic materials. 17 The Dow Chemical Company 2009 Annual Report 17

  • Page 20
    ... in 2009 to reflect the acquisition of Rohm and Haas. Product Safety Leadership u GOAL: Publish Product Safety Assessments for all products Before a product is considered for market, it must meet our high standards for both human and environmental safety. Dow's Product Safety Assessments...

  • Page 21
    ... this goal for the previous year is published annually in our second quarter. Our 2008 performance reflected low operating rates that impacted operational resource efficiency. Local Protection of Human Health and the Environment u GOAL: Achieve, on average, a 75% improvement of key indicators...

  • Page 22
    ... •฀฀ Started฀up฀a฀pilot฀plant฀based฀on฀advanced-amine฀ technology, jointly developed by Alstom and Dow, to capture CO2 emissions from the flue gas of a coalfired boiler in the Dow-owned South Charleston, West Virginia, plant. •฀฀ Announced฀plans฀to฀build฀a฀pilot...

  • Page 23
    ..., energy and climate change. For example, through Dow Venture Capital's investment in Water Health International, we have enabled access to clean drinking water for more than one million people in villages throughout India. Dow AgroSciences, working with Monsanto, has developed a new all-in-one corn...

  • Page 24
    ...resources in areas that we believe will make the most meaningful impact. Charitable Contributions: Site and Local Initiatives Asia Pacific: $1.6 million Europe: $2.0 million Total Site and Local Initiatives: $11.6 million India, Middle East and Africa: $1.2 million Latin America: $1.3 million North...

  • Page 25
    ... and plant trees. u THE RIGHT COMMITMENT Dow's charitable contributions, employee engagement and strategic partnerships are delivering solutions to communities around the world. The right initiatives today will contribute to community success tomorrow. 2009 AnnualReport Report 2009 Annual 23

  • Page 26
    ... science-driven chemical company in the world MISSION To passionately innovate what is essential to human progress by providing sustainable solutions to our customers CORPORATE STRATEGY To preferentially invest in a portfolio of technology-integrated, market-driven performance businesses that create...

  • Page 27
    ... (800) 258 2436 (Customer Information Group) or (989) 832 1556 (800) 232 2436 (Customer Service Center) (989) 636 1000 (Dow Operator/Switchboard) Investor Relations The Dow Chemical Company 2030 Dow Center Midland, MI 48674 U.S.A. Telephone: (800) 422 8193 (United States and Canada) (989) 636 1463...

  • Page 28
    ... 30, 2009 (based upon the closing price of $16.14 per common share as quoted on the New York Stock Exchange), was approximately $18.4 billion. For purposes of this computation, it is assumed that the shares of voting stock held by Directors, Officers and the Dow Employees' Pension Plan Trust would...

  • Page 29
    Part III: Proxy Statement for the Annual Meeting of Stockholders to be held on May 13, 2010.

  • Page 30
    The Dow Chemical Company ANNUAL REPORT ON FORM 10-K For the fiscal year ended December 31, 2009 TABLE OF CONTENTS PAGE PART I Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. Business. Risk Factors. Unresolved Staff Comments. Properties. Legal Proceedings. Submission of Matters to a Vote of ...

  • Page 31
    ..., food, home and personal care, water and energy production, and industrial specialty industries. These technology capabilities and market platforms enable the businesses to develop innovative solutions that address modern societal needs for sufficient and clean water, air and energy, material...

  • Page 32
    ... products and systems, as well as construction chemical solutions. Through its strong sales support, customer service and technical expertise, Dow Building Solutions provides meaningful solutions for improving the energy efficiency in homes and buildings today, while also addressing the industry...

  • Page 33
    ... management Dow AgroSciences is a global leader in providing agricultural and plant biotechnology products, pest management solutions and healthy oils. The business invents, develops, manufactures and markets products for use in agriculture, industrial and commercial pest management and food service...

  • Page 34
    ... segment also includes the results of Dow Fiber Solutions, providing differentiated fibers and process improvements to the textile industry, and Dow Oil and Gas, providing products for use in exploration and production, refining and gas processing, transportation, and fuel and lubricant performance...

  • Page 35
    ... for the agricultural industry and personal care products. · Products: Alkyl alkanolamines; Ethanolamines; Ethyleneamines; Isopropanolamines; Piperazine; VERSENE™ chelating agents The Emulsion Polymers business provides a broad line of styrene-butadiene products supporting customers in paper...

  • Page 36
    ... specialty chemicals and polymers industries, and SAFECHEM, a wholly owned subsidiary that manufactures closedloop systems to manage the risks associated with chlorinated solvents. The segment also includes a portion of the results of the OPTIMAL Group of Companies (through September 30, 2009; see...

  • Page 37
    ... corporate overhead costs and cost recovery variances not allocated to the operating segments. Corporate also includes the results of the Salt business, which the Company acquired with the April 1, 2009 acquisition of Rohm and Haas and sold to K+S Aktiengesellschaft on October 1, 2009. Industry...

  • Page 38
    ...and international oil companies, advanced material suppliers and producers of crop protection chemicals and agricultural biotechnology provide substantial competition in the United States and abroad. Dow competes worldwide on the basis of quality, technology, price and customer service, and for 2009...

  • Page 39
    ...is to protect the results of its research for use in operations and licensing. Dow is also party to a substantial number of patent licenses and other technology agreements. The Company had revenue related to patent and technology royalties totaling $269 million in 2009, $307 million in 2008 and $247...

  • Page 40
    ... operations in the United States. Information on sales and long-lived assets by geographic area for each of the last three years appears in Note Y to the Consolidated Financial Statements, and discussions of the Company's risk management program for foreign exchange and interest rate risk management...

  • Page 41
    ... basis of quality, price, technology and customer service. Increased levels of competition could result in lower prices or lower sales volume, which would have a negative impact on the Company's results of operations. The earnings generated by the Company's basic chemical and basic plastic products...

  • Page 42
    ... markets could limit customers' ability to obtain adequate financing to maintain operations, which could result in a decrease in sales volume and have a negative impact on Dow's results of operations. Weather-related matters could impact the Company's results of operations. In 2005 and 2008, major...

  • Page 43
    ... Company's current expectations. Realizing the benefits of the acquisition requires the successful integration of some or all of the sales and marketing, distribution, manufacturing, engineering, finance, information technology systems and administrative operations of Rohm and Haas with those of Dow...

  • Page 44
    Table of Contents The Dow Chemical Company and Subsidiaries PART I, Item 1B. Unresolved Staff Comments. UNRESOLVED STAFF COMMENTS None. 16

  • Page 45
    ... for the manufacture and distribution of Dow's products. During 2009, the Company's chemicals and plastics production facilities and plants operated at approximately 74 percent of capacity. The Company's major production sites are as follows: United States: Canada: Germany: France: The Netherlands...

  • Page 46
    ... pending and future claims for the 15-year period ending in 2017 to $2.2 billion, excluding future defense and processing costs. Since then, Union Carbide has compared current asbestos claim and resolution activity to the results of the most recent ARPC study at each balance sheet date to determine...

  • Page 47
    ..., ARPC reviewed and analyzed data through October 31, 2008. The resulting study, completed by ARPC in December 2008, stated that the undiscounted cost of resolving pending and future asbestos-related claims against Union Carbide and Amchem, excluding future defense and processing costs, through...

  • Page 48
    ... above were based upon current, known facts. However, future events, such as the number of new claims to be filed and/or received each year, the average cost of disposing of each such claim, coverage issues among insurers, and the continuing solvency of various insurance companies, as well as the...

  • Page 49
    ...Contents Environmental Matters Rohm and Haas Colombia Ltda. ("ROHC"), a wholly owned subsidiary of the Company, received an Administrative Complaint dated March 26, 2009 from the Corporacion Autonoma Regional del Atlantico for an alleged violation relating to a release of high manganese level water...

  • Page 50
    ... subsidiary of the Company, and who elected to receive a lump sum benefit from the Rohm and Haas Plan, the right to a cost-of-living adjustment ("COLA") as part of their retirement benefit. In August 2007, the Seventh Circuit Court of Appeals affirmed the District Court's decision, and in March 2008...

  • Page 51
    .... Latin America Payables Controller 1994-1997. Global Payables Controller 1997-1998. Global Procurement Service Center Leader 1998-2001. Global Accounting Director 20012007. Business Finance Vice President for Performance Plastics and Chemicals and Market Facing Businesses 2007 to June 2009. Vice...

  • Page 52
    ... and Engineering Operations February 2009 to date. Ex-officio member of the Dow Board of Director's Environment, Health and Safety Committee. Board member of Oman Petrochemical Industries Company LLC.* Director of TRW Automotive Holdings Corporation. Director of the National Association of...

  • Page 53
    ...Vice President and Chief Financial Officer 2005 to November 2009. Board member of The Dow Chemical Company 2005 to November 2009. President of Dow Europe, Middle East and Africa, and Chairman of Dow Europe November 2009 to date. Board member of Dow Corning Corporation.* Chairman of Dow International...

  • Page 54
    ... 2009. Vice President and Interim Chief Financial Officer November 2009 to date. Director of Diamond Capital Management Inc.,* Dorinco Reinsurance Company* and Liana Limited.* Director of the Dow Chemical Employees' Credit Union and Family and Children's Services of Midland. Board and finance...

  • Page 55
    ...SECURITIES The principal market for the Company's common stock is the New York Stock Exchange, traded under the symbol "DOW." Quarterly market and dividend information can be found in Quarterly Statistics at the end of Part II, Item 8. Financial Statements and Supplementary Data, following the Notes...

  • Page 56
    ... shares outstanding (thousands) Year-end Financial Position Total assets Working capital Property - gross Property - net Long-term debt and redeemable preferred stock Total debt The Dow Chemical Company's stockholders' equity Financial Ratios Research and development expenses as percent of net sales...

  • Page 57
    ... on sales in 2000 and of insurance operations in 2002. (3)Adjusted for 3-for-1 stock split in 2000. (5)Stockholders of record as reported by the transfer agent. The Company estimates that there were an additional 563,000 stockholders whose shares were held in nominee names at December 31, 2009. 28

  • Page 58
    ... to noncontrolling interests Preferred stock dividends Income (Loss) before cumulative effect of changes in accounting principles Cumulative effect of changes in accounting principles Net income (loss) available for The Dow Chemical Company common stockholders $ Per share of common stock (in dollars...

  • Page 59
    ...The Dow Chemical Company's stockholders' equity Financial Ratios Research and development expenses as percent of net sales (2) Income (Loss) from continuing operations before income taxes as percent of net sales (2) Return on stockholders' equity (4) Debt as a percent of total capitalization General...

  • Page 60
    ... Results Electronic and Specialty Materials Page 31 33 33 40 Coatings and Infrastructure Health and Agricultural Sciences Performance Systems Performance Products Basic Plastics Basic Chemicals Hydrocarbons and Energy Sales Price and Volume Charts Liquidity and Capital Resources Cash Flow Working...

  • Page 61
    ... into an earnings growth company. With this acquisition, Dow became a leading global specialty chemicals and advanced materials company. See Note D to the Consolidated Financial Statements for additional information. · The Company's Board of Directors approved a restructuring plan related to Dow...

  • Page 62
    ... Financial Statements for additional information on divestitures. · · · · · Dow AgroSciences LLC and Monsanto Company announced the completion of U.S. and Canadian regulatory authorizations for SmartStax™, the agriculture industry's most advanced, all-in-one corn trait platform. Dow...

  • Page 63
    ... billion in estimated pretax annual cost synergies and savings including increased purchasing power for raw materials; manufacturing and supply chain work process improvements; and the elimination of redundant corporate overhead for shared services and governance. The Company also anticipates that...

  • Page 64
    ... quarter of 2008 related to the K-Dow transaction; these costs were expensed (to "Cost of sales") upon PIC's refusal to close the K-Dow transaction (reflected in Corporate). Dow's global plant operating rate (for its chemicals and plastics businesses) was 74 percent of capacity in 2009 compared...

  • Page 65
    ... and Haas and strategic growth initiatives at Dow AgroSciences, partially offset by cost savings initiatives. The increase in R&D expenses in 2008 versus 2007 was primarily due to planned spending for growth initiatives in the Performance businesses and the addition of R&D expenses related to new...

  • Page 66
    ... restructuring activities, both reflected in Corporate. Additionally, in the fourth quarter of 2009, the Company reduced the restructuring liability assumed from Rohm and Haas by $9 million, reflected in "Cost of sales" and impacting Corporate. On December 5, 2008, the Company's Board of Directors...

  • Page 67
    ... Corporation ("Dow Corning") and the OPTIMAL Group of Companies ("OPTIMAL") reporting the largest declines. Improved results were reported by The Kuwait Olefins Company K.S.C. in 2009 due to additional production capacity for ethylene oxide/ethylene glycol and polyethylene. Equity earnings for 2009...

  • Page 68
    ...1, 2009 acquisition of Rohm and Haas. See "Changes in Financial Condition" for additional information regarding debt financing activity related to the acquisition. Interest income was $39 million in 2009, down from $86 million in 2008 and $130 million in 2007, principally due to lower interest rates...

  • Page 69
    ...Impacting Results In millions, except per share amounts Cost of sales: One-time increase in cost of sales related to fair valuation of Rohm and Haas inventories $ Impact of Hurricanes Gustav and Ike K-Dow related expenses Goodwill impairment losses Restructuring charges Purchased in-process research...

  • Page 70
    ... Rohm and Haas Results In millions Three months ended March 31, 2009 $ Impact of Hurricanes Gustav and Ike Restructuring charges Transaction and other acquisition costs Gain on sale of 40 percent equity investment in UP Chemical Company Total Rohm and Haas Certain Items Year ended Dec. 31, 2008...

  • Page 71
    ...2008 included a gain of $87 million resulting from the sale of Rohm and Haas' investment in UP Chemical Company, restructuring charges of $12 million and hurricane-related costs of $1 million. Specialty Materials sales for 2009 were down 18 percent versus 2008 with volume down 12 percent and prices...

  • Page 72
    ... projects and industrial applications is expected to drive higher sales for Dow Water and Process Solutions. Sales of biocides and the specialty chemical products of ANGUS Chemical Company are also expected to increase versus 2009. COATINGS AND INFRASTRUCTURE 2009 Versus 2008 (Pro Forma...

  • Page 73
    ... costs of purchases made earlier in the year. The commodity product glyphosate accounted for the vast majority of the overall decline in prices compared with 2008. Volume increased as new seed acquisitions and growth in the corn, soybean and sunflower portfolios resulted in a 33 percent sales growth...

  • Page 74
    ... in 2008, as Dow AgroSciences continued to increase its scale and reach in the seeds industry. EBITDA for 2008 was $872 million, compared with $576 million in 2007. EBITDA for 2008 improved significantly due to the increase in sales, the result of the buoyant agricultural market and new product...

  • Page 75
    ... demand in China, particularly for epoxy systems used in wind energy applications. EBITDA for 2009 increased compared with 2008, primarily due to lower raw material costs and cost savings initiatives. Dow Wire and Cable sales decreased 30 percent versus 2008, with a 17 percent decrease in volume and...

  • Page 76
    ... government stimulus plans will help accelerate spending on infrastructure projects in North America and Latin America, which is expected to fuel growth in the business. Prices are expected to increase, driven by higher feedstock and other raw material costs. PERFORMANCE PRODUCTS 2009 Versus 2008...

  • Page 77
    ... volume increase in Latin America. The sales decline was influenced by the slowdown of the global economy and weak demand, resulting in lower plant utilization rates for the Company. EBITDA increased compared with 2008, favorably impacted by lower feedstock and energy costs and the gain on sale...

  • Page 78
    ... impact the business. Sales are expected to increase, driven by higher prices due to higher raw material costs, combined with more positive industry supply/demand balances. In July 2009, the Company announced that styrene-butadiene latex would align with Styron, a new business unit of Dow being...

  • Page 79
    ...Pacific as government economic stimulus programs in China created increased demand. This increased demand, along with delays in new Middle East industry capacity and lower natural gas prices in North America, created economic conditions that promoted the export of North American production into Asia...

  • Page 80
    ... by the benefit of lower feedstock, raw material and freight costs, lower R&D and SG&A expenses, and higher equity earnings from Americas Styrenics LLC. 2008 Versus 2007 Sales for the Basic Plastics segment were $14,240 million in 2008, up 1 percent from $14,167 million in 2007. Prices increased 12...

  • Page 81
    ... from new industry capacity, while prices declined due to lower ethylene prices and weak demand. EBITDA for 2009 increased compared with 2008 due primarily to the gain on the sale of OPTIMAL, while the benefit of lower feedstock costs offset lower selling prices and lower equity earnings from...

  • Page 82
    ... from cost pressure related to higher feedstock and energy prices. EG sales are expected to decrease in 2010 as volume is negatively impacted by increased industry run rates and the full-year impact of new industry production capacity in the Middle East and Asia Pacific that started up in 2009, as...

  • Page 83
    ... signs of demand recovery, while the energy sector remains volatile. CORPORATE 2009 Versus 2008 (Pro Forma Comparison) Sales for Corporate, which primarily related to Morton International, Inc. (the Salt business acquired with the Rohm and Haas acquisition) and the Company's insurance operations...

  • Page 84
    ... related to the K-Dow transaction of $69 million and the acquisition of Rohm and Haas of $49 million; and costs associated with the U.S. Gulf Coast hurricanes of $9 million. EBITDA in 2008 was also impacted by lower foreign exchange hedging results, lower earnings from insurance company operations...

  • Page 85
    ... Comparison Percent change from prior year Volume 2009 Price (4)% (7) Total Operating Segments: Electronic and Specialty Materials Coatings and Infrastructure Health and Agricultural Sciences Performance Systems Performance Products Basic Plastics Basic Chemicals Hydrocarbons and Energy Total...

  • Page 86
    ... the Company's intense focus on cost control and cash generation in the fourth quarter of 2008 in response to the global economic downturn. Cash used in investing activities in 2009 increased over 2008, reflecting the April 1, 2009 acquisition of Rohm and Haas for $15,681 million and the purchase of...

  • Page 87
    ... support services. These restructuring activities are scheduled to be completed during the next two years. The restructuring activities related to the 2007 Plan, the 2008 Plan, the 2009 Plan and the severance reserve assumed from Rohm and Haas are expected to result in additional cash expenditures...

  • Page 88
    ... stock, depositary shares, debt securities, warrants, stock purchase contracts and stock purchase units with pricing and availability dependent on market conditions. On April 1, 2009, the Company completed the acquisition of Rohm and Haas. Pursuant to the July 10, 2008 Agreement and Plan of...

  • Page 89
    ... to the Consolidated Financial Statements for more information on the acquisition of Rohm and Haas and the corresponding financing activities. On June 4, 2009, the preferred partner of Tornado Finance V.O.F., a consolidated foreign subsidiary of the Company, notified Tornado Finance V.O.F. that the...

  • Page 90
    ... the Company's capital expenditures were directed toward additional capacity for new and existing products, compared with 40 percent in 2008 and 31 percent in 2007. In 2009, approximately 20 percent was committed to projects related to environmental protection, safety, loss prevention and industrial...

  • Page 91
    ...discount of $485 million, which is reflected in "2015 and beyond." (2) Deferred income tax liabilities may vary according to changes in tax laws, tax rates and the operating results of the Company. As a result, it is impractical to determine whether there will be a cash impact to an individual year...

  • Page 92
    ... the credit markets, unprecedented lower demand for chemical products and the ongoing global recession. The Company declared dividends of $0.60 per share in 2009, $1.68 per share in 2008 and $1.635 per share in 2007. On December 10, 2009, the Board of Directors declared a quarterly dividend of $85...

  • Page 93
    ...an earnings growth company and emphasized its commitment to financial discipline, most notably accomplishing the following in 2009: closing the acquisition of Rohm and Haas; accelerating significant cost synergies related to the acquisition and other restructuring programs; completing capital market...

  • Page 94
    ... reserves may change in the future due to new developments in each matter. For further discussion, see Note N to the Consolidated Financial Statements. Asbestos-Related Matters of Union Carbide Corporation Union Carbide Corporation ("Union Carbide"), a wholly owned subsidiary of the Company, and...

  • Page 95
    ... of 2009 with two significant carriers. The amounts recorded by Union Carbide for the asbestos-related liability and related insurance receivable were based upon current, known facts. However, future events, such as the number of new claims to be filed and/or received each year, the average cost of...

  • Page 96
    ... revenue growth rate, terminal value (calculated using the Gordon Growth Model), and discount rate are evaluated by reporting unit to account for differences in business fundamentals and industry risk. For the 2009 annual impairment test, the tax rate was set at 25 percent, currency exchange rates...

  • Page 97
    ... acquired Rohm and Haas businesses (i.e., Electronic Materials and Adhesives and Functional Polymers), fair value did not exceed book value by a significant margin which is reasonable given that the Rohm and Haas acquisition closed within the current year. The Automotive Systems reporting unit...

  • Page 98
    ... due to the acquisition of plan assets and obligations from Rohm and Haas combined with lower discount rates. The increase was partially offset by favorable plan asset returns during the year. The Company did not make any contributions to the U.S. qualified plans in 2009. The assumption for...

  • Page 99
    ...in order of increasing subjectivity, taxable income in prior carryback years, the future reversals of existing taxable temporary differences, tax planning strategies and forecasted taxable income using historical and projected future operating results. At December 31, 2009, the Company had deferred...

  • Page 100
    ... in capital over a ten-year period for plant security, supply chain and cyberspace security enhancements, regulatory compliance and response capabilities as well as other components of Dow's security program. These costs are not considered material to the Company's consolidated financial statements...

  • Page 101
    ... of clean energy annually, enough to power 90,000 homes and save 450,000 tons of carbon dioxide per year. Gains made toward Dow's Energy Efficiency goal will directly impact progress in meeting its 2015 Climate Change goal to reduce GHG intensity by 2.5 percent a year per pound of product, from...

  • Page 102
    ...Midland site. On April 1, 2009, the Company acquired Rohm and Haas' Philadelphia Plant, which has been an industrial site since the early 1700s, and since the 1920s used by Rohm and Haas for the manufacture of a wide range of chemical products. Chemical disposal practices in the early years resulted...

  • Page 103
    ... ("Union Carbide"), a wholly owned subsidiary of the Company, is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past three decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products and...

  • Page 104
    ... pending and future claims for the 15-year period ending in 2017 to $2.2 billion, excluding future defense and processing costs. Since then, Union Carbide has compared current asbestos claim and resolution activity to the results of the most recent ARPC study at each balance sheet date to determine...

  • Page 105
    ..., was $58 million in 2009, $53 million in 2008 and $84 million in 2007, and was reflected in "Cost of sales" in the consolidated statements of income. Insurance Receivables At December 31, 2002, Union Carbide increased the receivable for insurance recoveries related to its asbestos liability to...

  • Page 106
    ...and the Company has informed PIC that it breached the JVFA. On January 6, 2009, the Company announced that it would seek to fully enforce its rights under the terms of the JVFA and various related agreements. Currently, the Company continues in a process to consider alternatives for these businesses...

  • Page 107
    ... additional exposures is not material to the Company's results. The global nature of Dow's business requires active participation in the foreign exchange markets. As a result of investments, production facilities and other operations on a global basis, the Company has assets, liabilities and cash...

  • Page 108
    ... of The Dow Chemical Company and subsidiaries at December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America. Also...

  • Page 109
    Table of Contents The Dow Chemical Company and Subsidiaries Consolidated Statements of Income (In millions, except per share amounts) For the years ended December 31 Net Sales Cost of sales Research and development expenses Selling, general and administrative expenses Amortization of intangibles ...

  • Page 110
    ... stock (authorized 1,500,000,000 shares of $2.50 par value each; issued 1,162,375,462 shares) Additional paid-in capital Retained earnings Accumulated other comprehensive loss Unearned ESOP shares Treasury stock at cost (2009: 12,158,605 shares; 2008: 57,031,291 shares) The Dow Chemical Company...

  • Page 111
    ... Contents The Dow Chemical Company and Subsidiaries Consolidated Statements of Cash Flows (In millions) For the years ended December 31 2009 $ 676 2,827 7 (652) 60 (355) (9) (256) (22) (795) 7 684 - 2008 $ 654 2,236 44 2007 $ 2,985 2,190 57 494 (348) Operating Activities Net Income Adjustments...

  • Page 112
    81

  • Page 113
    ... at end of year Additional Paid-in Capital Balance at beginning of year Common stock issued Sale of shares to ESOP Stock-based compensation and allocation of ESOP shares Balance at end of year Retained Earnings Balance at beginning of year Net income available for The Dow Chemical Company common...

  • Page 114
    Total Equity See Notes to the Consolidated Financial Statements. $ 21,124 $ 13,580 $ 19,803 82

  • Page 115
    ... Dow Chemical Company and Subsidiaries Consolidated Statements of Comprehensive Income (In millions) For the years ended December 31 Net Income Other Comprehensive Income (Loss), Net of Tax (tax amounts shown below for 2009, 2008, 2007) Unrealized gains (losses) on investments: Unrealized holding...

  • Page 116
    ... Information M Earnings Per Share Calculations N Commitments and Contingent Liabilities O Notes Payable, Long-Term Debt and Available Credit Facilities P Pension Plans and Other Postretirement Benefits Q Leased Property R Variable Interest Entities S Stock-Based Compensation T Limited Partnership...

  • Page 117
    ... and swaps), the Company uses standard pricing models with market-based inputs that take into account the present value of estimated future cash flows. The Company utilizes derivatives to manage exposures to currency exchange rates, commodity prices and interest rate risk. The fair values of all...

  • Page 118
    ...-lived assets to be disposed of by sale are classified as held for sale and are reported at the lower of carrying amount or fair value less cost to sell, and depreciation is ceased. Goodwill and Other Intangible Assets The Company records goodwill when the purchase price of a business acquisition...

  • Page 119
    ...costs are accrued under the guidance of ASC Topic 712, "Compensation - Nonretirement Postemployment Benefits," once management commits to a plan of termination including the number of employees to be terminated, their job classifications or functions, their locations and the expected completion date...

  • Page 120
    ... Attributable to The Dow Chemical Company." "Net Income Available for The Dow Chemical Company Common Stockholders" is equivalent to the previously reported "Net Income Available for Common Stockholders." No change was required to the presentation of earnings per share. The Consolidated Balance...

  • Page 121
    ... 31, 2009, the Company adopted FSP No. FAS 132(R)-1, "Employers' Disclosures about Postretirement Benefit Plan Assets" (codified in ASC Topic 715, "Compensation - Retirement Benefits"). The FSP requires new disclosures on investment policies and strategies, categories of plan assets, fair value...

  • Page 122
    ... On June 30, 2009, the Company's Board of Directors approved a restructuring plan related to the Company's acquisition of Rohm and Haas Company ("Rohm and Haas") as well as actions to advance the Company's strategy and to respond to continued weakness in the global economy. The restructuring...

  • Page 123
    ... fourth quarter of 2009, the Company increased the reserve by $13 million to reflect additional expense for pension settlements related to the Rohm and Haas acquisition. Severance Costs The restructuring charges included severance of $155 million for the separation of approximately 2,500 employees...

  • Page 124
    ... employees under the terms of Rohm and Haas' ongoing benefit arrangement. The separations resulted from plant shutdowns, production schedule adjustments, productivity improvements and reductions in support services. Cash payments are expected to be paid over the next two years. In the fourth quarter...

  • Page 125
    ...: Performance Systems Health and Agricultural Sciences Basic Plastics Corporate Adjustments to 2006 restructuring charge: Basic Chemicals Corporate Net 2008 restructuring charges Impairment of Costs associated Long-Lived with Exit or Assets and Other Disposal Assets Activities Severance Costs $ 10...

  • Page 126
    ... sale of the automotive sealants business in Europe, an impairment charge of $8 million against the Performance Systems segment was recorded in the fourth quarter of 2008. The business was sold in the first quarter of 2009. Due to a change in scope, the Company's investment (primarily engineering...

  • Page 127
    ... 3, 2007, the Company's Board of Directors approved a restructuring plan that included the shutdown of a number of assets and organizational changes within targeted support functions to improve the efficiency and cost effectiveness of the Company's global operations. As a result of these shutdowns...

  • Page 128
    ...agricultural products manufacturing site located in Lauterbourg, France. Upon completion of the information/consultation process, the plant was shut down in the fourth quarter of 2008. A $44 million write-down of the net book value of the related buildings, machinery and equipment against the Health...

  • Page 129
    ...53 million represented the Company's best estimate of the fair value to negotiate the settlement of the early cancellation of several service and supply agreements principally related to the shutdown of manufacturing assets within the Performance Systems and Health and Agricultural Sciences segments...

  • Page 130
    ... $15,681 million. As part of the purchase price, $552 million in cash was paid to the Rohm and Haas Company Employee Stock Ownership Plan ("Rohm and Haas ESOP") on April 1, 2009 for 7.0 million shares of Rohm and Haas common stock held by the Rohm and Haas ESOP. As a condition of the FTC's approval...

  • Page 131
    ...1, 2009 acquisition. Included in the results from Rohm and Haas was $257 million of restructuring charges (see Note C for information regarding the Company's 2009 restructuring activities), a one-time increase in cost of sales of $209 million related to the fair value step-up of inventories acquired...

  • Page 132
    ... of cost savings include increased purchasing power for raw materials; manufacturing and supply chain work process improvements; and the elimination of redundant corporate overhead for shared services and governance. The Company also anticipates that the transaction will produce significant growth...

  • Page 133
    ... based on a discounted cash flow model and are shown below: In-Process Research and Development Projects Acquired In millions Date of Acquisition October 30, 2009 $ Estimated Value Assigned to IPR&D 2009 Lithium ion battery technology purchase 2008 Germplasm from Triumph Seed Co., Inc. Germplasm...

  • Page 134
    ... The results of the Calcium Chloride business, including the second quarter of 2009 gain on the sale, are reflected as "Income from discontinued operations, net of income taxes (benefit)" in the consolidated statements of income for all periods presented. The following table presents the results of...

  • Page 135
    ...and plastics product inventories, represented 29 percent of the total inventories at December 31, 2009 and 32 percent of the total inventories at December 31, 2008. A reduction of certain inventories resulted in the liquidation of some of the Company's LIFO inventory layers, increasing pretax income...

  • Page 136
    ... 31, 2009, the carrying amount of the Company's investments in nonconsolidated affiliates was $52 million more than its share of the investees' net assets, exclusive of additional differences for Dow Corning Corporation ("Dow Corning"), MEGlobal, Equipolymers and Americas Styrenics LLC, which...

  • Page 137
    ...May 1, 2008 through December 31, 2008. The Company has service agreements with some of these entities, including contracts to manage the operations of manufacturing sites and the construction of new facilities; licensing and technology agreements; and marketing, sales, purchase and lease agreements...

  • Page 138
    ... Perf Systems Perf Products Basic Plastics Hydrocarbons and Energy Total Gross goodwill at Jan. 1, 2009 $ Accumulated impairments at Jan. 1, 2009 Net goodwill at Jan. 1, 2009 $ Goodwill related to 2009 acquisition of: Rohm and Haas Hyland Seed assets Adjustment related to 2008 acquisition of...

  • Page 139
    ... a review of the Polypropylene reporting unit performed by management, in which discounted cash flows did not support the carrying value of the goodwill due to demand decline in North America and Western Europe, as well as significant new industry capacity that came on stream in 2008 and additional...

  • Page 140
    ... value. At December 31, 2009, the Company had investments in money market funds of $164 million classified as cash equivalents. The net unrealized gain recognized during 2009 on trading securities still held at December 31, 2009 was $7 million. The following tables provide the fair value and gross...

  • Page 141
    ...31, 2008). Due to the nature of these investments, the fair market value is not readily determinable. These investments are reviewed for impairment indicators. During 2009, the Company's impairment analysis identified indicators which resulted in a reduction in the cost basis of these investments of...

  • Page 142
    ... investments" in the consolidated balance sheets. (2) Cost includes fair value adjustments of $25 million in 2009 and $27 million in 2008. Risk Management Dow's business operations give rise to market risk exposure due to changes in interest rates, foreign currency exchange rates, commodity prices...

  • Page 143
    ..., the Company had the following aggregate notionals of outstanding commodity forward contracts to hedge forecasted purchases: Commodity Crude Oil Naphtha Natural Gas 2009 0.7 50 2.0 2008 Notional Volume Unit 1.8 million barrels 33 kilotons million million British thermal 11.8 units Fair Value...

  • Page 144
    ...rate exposure. The Company had open foreign exchange contracts with various expiration dates to buy, sell or exchange foreign currencies with a U.S. dollar equivalent of $15,312 million at December 31, 2009 ($10,799 million at December 31, 2008). The following table provides the fair value and gross...

  • Page 145
    ... 31, 2009 In millions Change in Unrealized Loss in AOCI (1) Income Statement Classification Gain (Loss) Reclassified from AOCI to Income (2) Additional Gain (Loss) Recognized in Income (2,3) Derivatives designated as hedges: Fair value: Interest rates Cash flow: Interest rates Interest rates...

  • Page 146
    ...using quoted prices in active markets), the total fair value is either the price of the most recent trade at the time of the market close or the official close price, as defined by the exchange in which the asset is most actively traded on the last trading day of the period, multiplied by the number...

  • Page 147
    ...included anticipated revenues, associated manufacturing costs, capital expenditures and discount, growth and tax rates. On April 1, 2009, the Company announced the entry into a definitive agreement to sell the newly acquired stock of Morton International, Inc., the Salt business of Rohm and Haas, to...

  • Page 148
    .... The net cash flow in any given period represents the discount on sales, which is recorded as interest expense. The average monthly discount was not material in 2009, 2008 and 2007. See Note B for information regarding the anticipated impact of adopting ASU 2009-16, "Transfers and Servicing (Topic...

  • Page 149
    ... to The Dow Chemical Company Preferred stock dividends Net income available for common stockholders $ $ $ 2009 566 $ 110 (28) 648 $ (312) 336 $ 2008 626 $ 28 (75) 579 $ - 2007 2,962 23 (98) 2,887 - 579 $ 2,887 Earnings Per Share Calculations - Basic Dollars per share Net income from...

  • Page 150
    ...summarizes the activity in the Company's accrued obligations for environmental matters for the years ended December 31, 2009 and 2008: Accrued Obligations for Environmental Matters In millions 2009 $ 312 $ 2008 322 141 - Balance at January 1 Additional accruals Assumed from Rohm and Haas Charges...

  • Page 151
    ... the results of such work have been supplied to the MDEQ as provided for under the License. On June 15, 2009, Dow submitted a report to the MDEQ that consolidated soil and sediment sampling data, as well as other data, collected under sampling work plans approved by the MDEQ in 2006, 2007 and 2008...

  • Page 152
    ... issued a press release reporting that they were withdrawing from the alternative dispute resolution process. On September 28, 2007, the Company entered into a Funding and Participation Agreement with the natural resource damage trustees that addressed the Company's payment of past costs incurred by...

  • Page 153
    ... pending and future claims for the 15-year period ending in 2017 to $2.2 billion, excluding future defense and processing costs. Since then, Union Carbide has compared current asbestos claim and resolution activity to the results of the most recent ARPC study at each balance sheet date to determine...

  • Page 154
    ... above were based upon current, known facts. However, future events, such as the number of new claims to be filed and/or received each year, the average cost of disposing of each such claim, coverage issues among insurers, and the continuing solvency of various insurance companies, as well as the...

  • Page 155
    ... subsidiary of the Company, and who elected to receive a lump sum benefit from the Rohm and Haas Plan, the right to a cost-of-living adjustment ("COLA") as part of their retirement benefit. In August 2007, the Seventh Circuit Court of Appeals affirmed the District Court's decision, and in March 2008...

  • Page 156
    ... financial statements. Purchase Commitments The Company has numerous agreements for the purchase of ethylene-related products globally. The purchase prices are determined primarily on a cost-plus basis. Total purchases under these agreements were $784 million in 2009, $1,502 million in 2008 and...

  • Page 157
    ..., the Company considers identification of legally enforceable obligations, changes in existing law, estimates of potential settlement dates and the calculation of an appropriate discount rate to be used in calculating the fair value of the obligations. Dow has a well-established global process to...

  • Page 158
    ... unable to reasonably forecast a time frame to use for present value calculations. As such, the Company has not recognized obligations for individual plants/buildings at its manufacturing sites where estimates of potential settlement dates cannot be reasonably made. In addition, the Company has not...

  • Page 159
    ... of business and for other general corporate purposes. At December 31, 2009, the Company had an unused and committed balance of $3 billion under the Agreement. Debt financing for the acquisition of Rohm and Haas was provided by a $9,226 million draw on a Term Loan Agreement dated September 8, 2008...

  • Page 160
    ... debt acquired from Rohm and Haas and recognized a $56 million pretax loss on this early extinguishment, included in "Sundry income - net." On September 28, 2009, Calvin Capital LLC, a wholly owned subsidiary of the Company, repaid a $674 million note payable which was issued in September 2008. The...

  • Page 161
    ... benefit plan trusts. The discount rates utilized to measure the pension and other postretirement obligations of the U.S. qualified plans are based on the yield on high-quality fixed income investments at the measurement date. Future expected actuarially determined cash flows of Dow's major...

  • Page 162
    ... retiree has increased years of credited service, although there is a cap on the Company portion. The Company has the ability to change these benefits at any time. Employees hired after January 1, 2008 are not covered under the plans. The Company funds most of the cost of these health care and life...

  • Page 163
    ... of unrecognized loss (gain) 106 43 191 Curtailment/settlement/other costs (1) 13 54 11 Net periodic benefit cost $ 247 $ 122 $ 216 (1) See Note C for information regarding curtailment and settlement costs recorded in 2009, 2008 and 2007. Defined Benefit Pension Plans 2009 2008 270 $ 264 $ 1,081...

  • Page 164
    ... benefits/curtailment cost 44 Benefit obligations at end of year $ 19,914 $ 15,573 $ Other Postretirement Benefits 2009 2008 1,821 $ 1,890 16 18 138 117 - (75) 336 (171) 14 - (71) - (144) (23) 34 2,079 $ 1,821 Change in plan assets Fair value of plan assets at beginning of year Actual return...

  • Page 165
    ... benefits to plan participants while minimizing cash contributions from the Company over the life of the plans. This is accomplished by identifying and managing the exposure to various market risks, diversifying investments in various asset classes and earning an acceptable long-term rate of return...

  • Page 166
    ... the bases used to measure the Company's pension plan assets at fair value: Basis of Fair Value Measurements of Pension Plan Assets at December 31, 2009 In millions Cash and cash equivalents Equity securities: U.S. equity (1) Non-U.S. equity - developed Quoted Prices in Active Markets for...

  • Page 167
    ...pension or other post retirement benefit plan assets classified as Level 1 (measured using quoted prices in active markets), the total fair value is either the price of the most recent trade at the time of the market close or the official close price, as defined by the exchange on which the asset is...

  • Page 168
    ... buildings based on a fair market value determination. In 2009, the Company purchased a previously leased ethylene plant in Canada for $713 million. Rental expenses under operating leases, net of sublease rental income, were $459 million in 2009, $439 million in 2008 and $445 million in 2007. Future...

  • Page 169
    ...average assumptions used to calculate total stock-based compensation are included in the following table: 2009 Dividend yield Expected volatility Risk-free interest rate Expected life of stock options granted during period Life of Employees' Stock Purchase Plan 3.8% 43.78% 1.61% 6.25 years 9 months...

  • Page 170
    ...patterns, exercise rates were developed that resulted in an average life of 6.25 years for 2009 and 6 years for 2008 and 2007. EMPLOYEES' STOCK PURCHASE PLAN On February 13, 2003, the Board of Directors authorized a 10-year ESPP, which was approved by stockholders at the Company's annual meeting on...

  • Page 171
    ...at end of year (1) Weighted-average per share Additional Information about Deferred Stock In millions, except per share amounts Weighted-average fair value per share of deferred stock granted Total fair value of deferred stock vested and delivered (1) Related tax benefit Total compensation expense...

  • Page 172
    ... year (1) Weighted-average per share Additional Information about Performance Deferred Stock In millions Total fair value of performance deferred stock vested and delivered (1) $ Related tax benefit Total compensation expense for performance deferred stock awards $ Related tax benefit $ (1) 2009...

  • Page 173
    ...) to non-employee directors over the 10-year duration of the program, subject to an annual aggregate award limit of 25,000 shares for each individual director. In 2009, 53,600 shares of restricted stock with a weighted-average fair value of $6.47 per share were issued under this plan. The restricted...

  • Page 174
    ... 1, 2009 acquisition of Rohm and Haas, certain trusts established by members of the Haas family (the "Haas Trusts") and Paulson & Co. Inc. ("Paulson") purchased from the Company Cumulative Perpetual Preferred Stock, Series B ("preferred series B") in the amount of 2.5 million shares (Haas Trusts...

  • Page 175
    ... cash was paid to the Rohm and Haas Company Employee Stock Ownership Plan (the "Rohm and Haas ESOP") for 7.0 million shares of Rohm and Haas common stock held by the Rohm and Haas ESOP on April 1, 2009. On the date of the acquisition, the Rohm and Haas ESOP was merged into the Plan, and the Company...

  • Page 176
    ... as for the release of deferred and restricted stock out of treasury stock. The Company does not plan to repurchase shares for this activity in 2010. The number of treasury shares issued to employees and non-employee directors under the Company's option and purchase programs was 8.7 million in 2009...

  • Page 177
    ... was effective January 1, 2008. As a result of the change, the Company adjusted the value of its net deferred tax assets in Germany (using the lower tax rate) and recorded a charge of $362 million against the "Provision for income taxes" in the third quarter of 2007. Additionally, during 2007, the...

  • Page 178
    ... 2009 and $124 million at December 31, 2008. Total Gross Unrecognized Tax Benefits In millions Balance at January 1 Increases related to positions taken on items from prior years Decreases related to positions taken on items from prior years Increases related to positions taken in the current year...

  • Page 179
    ... AREAS Dow is a diversified, worldwide manufacturer and supplier of products used primarily as raw materials in the manufacture of customer products and services. The Company serves the following industries: appliance; automotive; agricultural; building and construction; chemical processing...

  • Page 180
    ..., food, home and personal care, water and energy production, and industrial specialty industries. These technology capabilities and market platforms enable the businesses to develop innovative solutions that address modern societal needs for sufficient and clean water, air and energy, material...

  • Page 181
    ... products and systems, as well as construction chemical solutions. Through its strong sales support, customer service and technical expertise, Dow Building Solutions provides meaningful solutions for improving the energy efficiency in homes and buildings today, while also addressing the industry...

  • Page 182
    ... fluids and lubricants; PULSEâ„¢ engineering resins; SPECFLEXâ„¢ semi-flexible polyurethane foam systems Dow Elastomers offers a unique set of elastomers, specialty films and plastic additive products for customers worldwide. The business is focused on delivering innovative solutions that allow for...

  • Page 183
    ... segment also includes the results of Dow Fiber Solutions, providing differentiated fibers and process improvements to the textile industry, and Dow Oil and Gas, providing products for use in exploration and production, refining and gas processing, transportation, and fuel and lubricant performance...

  • Page 184
    ... chemicals and polymers industries, and SAFECHEM, a wholly owned subsidiary that manufactures closedloop systems to manage the risks associated with chlorinated solvents. The segment also includes a portion of the results of the OPTIMAL Group of Companies (through the September 30, 2009 divestiture...

  • Page 185
    .... Through market and technical leadership and low cost capability, the business continues to improve product performance and meet customer needs. · Products: Licensing and supply of related catalysts, process control software and services for the Mass ABS process technology; STYRON ATECH...

  • Page 186
    ... results of the Salt business, which the Company acquired with the April 1, 2009 acquisition of Rohm and Haas and sold to K+S Aktiengesellschaft on October 1, 2009 (see Note E). Transfers of products between operating segments are generally valued at cost. However, transfers of products to Health...

  • Page 187
    ... Coatings and Infrastructure $ 4,156 - Health and Ag Sciences Perf Systems Perf Products Basic Plastics Basic Chemicals Hydrocarbons and Energy Corp $ 705 (103) Total 2009 Sales to external customers Intersegment revenues Equity in earnings of nonconsolidated affiliates Goodwill impairment...

  • Page 188
    ... is home to 62 of these sites, representing 51 percent of the Company's long-lived assets. Sales are attributed to geographic areas based on customer location; long-lived assets are attributed to geographic areas based on asset location. Geographic Area Information In millions United States Europe...

  • Page 189
    ...Contents The Dow Chemical Company and Subsidiaries Selected Quarterly Financial Data In millions, except per share amounts (Unaudited) 2009 Net sales $ Cost of sales Gross margin Goodwill impairment losses Restructuring charges Purchased in-process research and development charges Acquisition and...

  • Page 190
    Table of Contents The Dow Chemical Company and Subsidiaries PART II ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. 158

  • Page 191
    ..., 2009 includes the acquired Rohm and Haas businesses. There were no changes in the Company's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that was conducted during the last fiscal quarter that...

  • Page 192
    ... Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of The Dow Chemical Company: We have audited the internal control over financial reporting of The Dow Chemical Company and subsidiaries (the "Company") as of December 31, 2009, based on criteria established in...

  • Page 193
    Table of Contents ITEM 9B. OTHER INFORMATION. None. 161

  • Page 194
    ... STOCKHOLDER MATTERS. Information with respect to beneficial ownership of Dow common stock by each Director and all Directors and executive officers of the Company as a group is contained in the definitive Proxy Statement for the Annual Meeting of Stockholders of The Dow Chemical Company to be on...

  • Page 195
    ... by reference. The following exhibits, listed on the Exhibit Index, are filed with this Annual Report on Form 10-K: Exhibit No. Description of Exhibit Computation of Ratio of Earnings to Fixed Charges. 12.1 21 23(a) Subsidiaries of The Dow Chemical Company. Consent of Independent Registered Public...

  • Page 196
    ... Dow Chemical Company and Subsidiaries Schedule II Valuation and Qualifying Accounts In millions For the Years Ended December 31 COLUMN A COLUMN B Balance at Beginning of Year COLUMN C Additions to Reserves COLUMN D Deductions from Reserves COLUMN E Balance at End of Year Description 2009...

  • Page 197
    .... THE DOW CHEMICAL COMPAY By Date /s/ R. C. EDMONDS R. C. Edmonds, Vice President and Controller February 10, 2010 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and...

  • Page 198
    ... 2008, between The Dow Chemical Company and Petroleum Industries Company (K.S.C.), incorporated by reference to Exhibit 2.1 to The Dow Chemical Company Current Report on Form 8-K filed on February 19, 2009. 2(d) Stock Purchase Agreement, dated as of April 1, 2009, between Rohm and Haas Company and...

  • Page 199
    ... Dow Chemical Company Annual Report on Form 10-K for the year ended December 31, 2008. 10(i) The Dow Chemical Company 1994 Non-Employee Directors' Stock Plan, incorporated by reference to Exhibit 10(i) to The Dow Chemical Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2009...

  • Page 200
    ..., 2009, effective as of January 1, 2010, incorporated by reference to Exhibit 10.5 to The Dow Chemical Company Current Report on Form 8-K filed on February 18, 2010. Amended and Restated 2003 Non-Employee Directors' Stock Incentive Plan, adopted by the Board of Directors of The Dow Chemical Company...

  • Page 201
    ... Deferred Compensation Plan for Non-Employee Directors, effective for deferrals after January 1, 2005, as amended and restated on December 10, 2008, effective as of January 1, 2009, incorporated by reference to Exhibit 10(cc) to The Dow Chemical Company Annual Report on Form 10-K for the year ended...

  • Page 202
    ... Company, Ramses Acquisition Corp. and Rohm and Haas Company, incorporated by reference to Exhibit 10.1 to The Dow Chemical Company Current Report on Form 8-K filed on March 12, 2009. Investment Agreement, dated March 9, 2009, among The Dow Chemical Company, Paulson & Co. Inc. and the Haas Family...

  • Page 203
    ...vv) Stock Purchase Agreement, dated May 11, 2009, between The Dow Chemical Company and Fidelity Management Trust Services, as trustee of a trust established under The Dow Chemical Company Employees' Savings Plan, incorporated by reference to Exhibit 1.1 to The Dow Chemical Company Current Report on...

  • Page 204
    ... of Rohm and Haas Company, incorporated by reference to Exhibit 99.6 to The Dow Chemical Company Current Report on Form 8-K filed on April 1, 2009. 99.4 99.5 101.INS XBRL Instance Document (1) XBRL Taxonomy Extension Schema Document (1) XBRL Taxonomy Extension Calculation Linkbase Document...

  • Page 205
    Table of Contents The Dow Chemical Company and Subsidiaries Trademark Listing The following trademarks or service marks of The Dow Chemical Company and certain affiliated companies of Dow appear in this report: ACRYSOL, ACUDYNE, ACULYN, ACUMER, ACuPLANE, ACUSOL, ADCOTE, ADVASTAB, AERIFY, AFFINITY...

  • Page 206

  • Page 207
    EXHIBIT 12.1 The Dow Chemical Company and Subsidiaries Computation of Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Stock Dividend Requirements In millions, except ratio (Unauditede Income from Continuing Operations Before Income Taxes Add (deducte: Equity in ...

  • Page 208

  • Page 209
    ... 31, 2009 Location* This list includes companies for which the effective ownership by The Dow Chemical Company is 50 percent or more. The Dow Chemical Company Americas Styrenics LLC (1) Arabian Chemical Company (Latex) Ltd. (1) Arabian Chemical Company (Polystyrene) Limited (1) ARAKAWA Europe GmbH...

  • Page 210
    ...C.V. (1) (53) Dow Technology Investments LLC (43) Dow Holdings LLC Dow Corning Corporation (1) Dow Hydrocarbons and Resources LLC Cayuse Pipeline, Inc. Dow Intrastate Gas Company Dow Pipeline Company K/D/S Promix, LLC (1) Midland Pipeline Corp. Fort Saskatchewan Ethylene Storage Corporation (1) Fort...

  • Page 211
    ... Dow Europe GmbH Dolpa S.a.r.l. Dow-GACL SolVenture Limited (1) Dow Chemical IMEA GmbH Dow Contract Services FZE Dow Egypt Services Limited (49) Dow Mideast Systems S.A.E. (JSC) (2) Dow France S.A.S. Dow Hellas A.E. Dow Hungary Kft. (29) Dow InterBranch B.V. Business Process Service Center Terneuzen...

  • Page 212
    ...) Dow Roofing Systems LLC Dow South Africa Holdings (Pty) Ltd. Sentrachem Limited Cisvaal (Proprietary) Limited Minchem International Inc. South African Polymer Holdings (PTY) Ltd. Dow Trading S.A. Dow Trent Limited Dow UK Limited Haltermann Limited Ascot Investments Limited Ascot Chemicals Limited...

  • Page 213
    ... OMEX Environmental Engineering Co., Ltd. Flexible Products Company Flexible Products Company of Canada, Inc Forbanco Inc. General Latex and Chemical Corporation GNS Enterprises, LLC GNS Technologies, LLC Great Western Pipeline Company, Inc. GWN Holding, Inc. (37) Dow Canada Holding LP Dow Canadian...

  • Page 214
    ...PT Dow Chemical Indonesia (18) Raven Group Ltd. RavenWorks Ltd. Rofan Services Inc. Dow AgroSciences LLC (9) DowBrands Inc. (17) Ion Holdings LLC (20) Mycogen Corporation (16) Dow AgroSciences LLC (9) Alsan Research (1) Bayer DAS (Private) Ltd (1) DAS Agricultural Investment Holding Company Ltd. Dow...

  • Page 215
    .... (56) Rohm and Haas Colombia Ltda (57) Elemica Holdings Limited Rohm and Haas Argentina S.R.L. (58) Rohm and Haas Australia Pty. Ltd. (55) Rohm and Haas Chemicals LLC (59) CVD Incorporated Morton Intermediate Company Rohm and Haas Electronic Materials Taiwan Ltd. Morton International Co., Ltd...

  • Page 216
    ...Investment Holding Company Ltd (60) Rohm and Haas Holdings Ltd. (61) Rohm and Haas Capital Corporation Rohm and Haas Equity Corporation (62) ROH Venture GmbH StoHaas Management GmbH (1) StoHaas Monomer GmbH & Co. KG (1) Rohm and Haas Asia, Inc. Rohm and Haas Chemical (Thailand) Limited Rohm and Haas...

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    ...Eastern Europe Holding ApS (73) Denmark Finndisp Ltd. Russia Limited Liability Company "Rohm and Haas" Russia Rohm and Haas Polska Sp. z o.o. Poland Rohm and Haas Europe Sales ApS Denmark Rohm and Haas Europe Sarl Switzerland Rohm and Haas Europe Services ApS Denmark Rohm and Haas Europe Trading ApS...

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    ...Chemical Co., Ltd. Rohm and Haas Equity Corporation (62) Rohm and Haas Holdings LLC Rohm and Haas Chemicals LLC (59) Rohm and Haas Electronic Materials Holdings, Inc. Rohm and Haas Electronic Materials CMP Inc. Rohm and Haas Electronic Materials CMP Asia Inc. Nitta Haas Trading Company Rohm and Haas...

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    ... Corporation (62) Rohm and Haas Latin America, Inc. Rohm and Haas Chemicals LLC (59) Rohm and Haas Investment Holdings Inc. (65) Rohm and Haas New Zealand Limited Rohm and Haas Philippines, Inc. Rohm and Haas Quimica Ltda. Rohm and Haas Southeast Asia, Inc. Rohm and Haas Vermont Company RohmNova LLC...

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    ... Carbide Chemicals & Plastics Technology LLC Dow Petrochemicals Holding LLC (48) Dow Technology Investments LLC (43) Union Carbide Comercial Nicaragua, S.A. Union Carbide Customer Services Pte. Ltd. Union Carbide Ethylene Oxide/Glycol Company Union Carbide Inter-America, Inc. Dow Quimica Chilena...

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    ...AgroSciences LLC is 100% of which Mycogen Corporation owns 51%, Centen Ag Inc. owns 38.91% and Rofan Services Inc. owns 10.09%. The Dow Chemical Company effective ownership of Polyol Belgium B.V.B.A. is 100% of which Dow Benelux B.V. owns 99.5% and Dow Europe Holding B.V. owns 0.5%. The Dow Chemical...

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    ...of Pacific Plastics (Thailand) Limited is 100% of which Dow Chemical International Ltd. owns 51% and The Dow Chemical Company owns 49%. The Dow Chemical Company effective ownership of Dow Petrochemicals Holding LLC is 100% of which The Dow Chemical Company owns 25%, Dow Global Technologies Inc. owns...

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    ... LLC is 100% of which Rohm and Haas Holdings LLC owns 76.80153%, Rohm and Haas Company owns 23.13014% and Rohm and Haas Latin America, Inc. owns .06833%. The Dow Chemical Company effective ownership of Rohm and Haas China Investment Holding Company Ltd is 100% of which Rohm and Haas Denmark Finance...

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    ... of Rohm and Haas Europe Trading ApS is 100% of which Rohm and Haas Denmark European Investment ApS is 84.168012% and Morton Service B.V. owns 15.831988%. The Dow Chemical Company effective ownership of Rohm and Haas Kimya Sanayi Limited Sirketi is 100% of which Rohm and Haas Turkey Industry Holding...

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    ... Dow Chemical Company and subsidiaries (the "Company"), and the effectiveness of the Company's internal control over financial reporting, appearing in this Annual Report on Form 10-K of The Dow Chemical Company for the year ended December 31, 2009, in the following Registration Statements of The Dow...

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    ... & Planning Corporation ("ARPC") hereby consents to the use of ARPC's name and the reference to ARPC's reports in this Annual Report on Form 10-K of The Dow Chemical Company for the year ended December 31, 2009, and the incorporation by reference thereof in the following Registration Statements of...

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    ... Chemical Company and Subsidiaries Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Andrew N. Liveris, certify that: 1. 2. I have reviewed this annual report on Form 10-K of The Dow Chemical Company; Based on my knowledge, this report does not contain any untrue statement...

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    ... Company and Subsidiaries Certification Pursuant to Section 302 of the Sarbanes-Oxbey Act of 2002 I, William H. Weideman, certify that: 1. 2. I have reviewed this annual report on Form 10-K of The Dow Chemical Company; Based on my knowledge, this report does not contain any untrue statement...

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    ...N. Liveris, President, Chief Executive Officer and Chairman of the Board of The Dow Chemical Company (the "Company"), certify that: 1. the Annual Report on Form 10-K of the Company for the year ended December c1, 2009 as filed with the Securities and Exchange Commission (the "Report") fully complies...

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    ... William H. Weideman, Vice President and Interim Chief Financial Officer of The Dow Chemical Company (the "Company"), certify that: 1. the Annual Report on Form 10-K of the Company for the year ended December 31, 2009 as filed with the Securities and Exchange Commission (the "Report") fully complies...

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    The Dow Chemical Company Midland, MI 48674 U.S.A. Investor Relations (800) 422 8193 (989) 636 1463 [email protected] The Dow Chemical Company 2009 Annual Report ® â„¢ The DOW Diamond Logo and Human Element and design are trademarks of The Dow Chemical Company © 2010 â„¢ AERIFY, ECOSURF, FILMTEC, ...